- Identify the financial statement where you can find the source of financing for a company to buy assets.
- Name the category that liabilities must be paid from.
- Explain what you want to see when you look at a company’s operating income percentage.
- List the steps to calculate accounts receivable turnover.
- Identify the two components to use when calculating current ratio.
- Recall the pitfall you need to avoid when performing financial ratio analysis.
Skill Level Intermediate
- Hi, I'm Jim Stice. I'm a professor of accounting at Brigham Young University. This is my brother, Kay. - I'm also a professor of accounting at Brigham Young University. We are an accounting family. - Absolutely. We love numbers. We love financial statements, and we love using financial reports to gain insights into how companies work. - [Kay] This course introduces you to methods of financial ratio analysis that'll allow you to use a company's financial reports to identify the company's strengths and weaknesses. - [Jim] You can use a company's financial reports to identify areas for improvement, as well as to identify areas of risk. - [Kay] Before taking this course, you might consider taking our accounting fundamentals course. That course introduces you to the major areas of accounting. - But with that said, we have designed this financial ratio analysis course to be self-contained. And we carefully explain any accounting terminology that we use. - In short, this is an introductory course with no prior accounting knowledge necessary. - So what can you learn using financial ratio analysis? Well, you can learn how much Walmart marks up its items that it sells to you. - In other words, when Walmart sells you an item for $10, how much did Walmart have to pay to buy that item? - You can also learn how many days, on average, items hang on the racks and sit on the shelves at Nordstrom before they're sold. The answer is about 60 days. - You can learn the same thing about the food at McDonald's. Hopefully the answer is substantially less than 60 days. - Financial ratio analysis is the process of using the relationships among a company's financial numbers to gain insights into that company's operations. - Let's go!